Will Vince Cable become chairman of the banks?
The coalition’s programme for government will not please all businesses and business people.
There is a surprising amount of detailed policy to promote equality, for example, which will give the willies to some of the more traditional Tory-supporting corporate grandees.
So, for example, there’s a pledge to promote gender equality on the boards of listed companies.
That said, there’s conspicuous gender inequality on the board of UK plc, otherwise known as the cabinet. And if the target is to match the balance between the sexes in Mr Cameron’s team – well, most big companies won’t be sweating.
As for the banks in which taxpayers own huge stakes, Royal Bank of Scotland and Lloyds, they may be somewhat alarmed by the remarks this morning of Vince Cable, the business secretary, that they should become instruments of the state.
In particular, he wants to rip up their agreements with the previous government to provide a specific amount of gross lending to business and to replace those agreements with new targets for net lending.
This may sound a technical issue of little importance, but it matters.
As I’ve pointed out here on many occasions, any bank can take money out of the economy while increasing gross lending, so long as repayment of existing loans exceeds new lending.
It’s therefore much more stretching and demanding for a bank to be obliged to increase net lending.
Banks however would argue that it would be bonkers to oblige them to increase net lending, because they would be under pressure to provide credit to those who don’t deserve it.
And they would also make the point that what got the UK into its current economic mess is that banks lent far too much to households, businesses and other banks: forcing them to repeat the mistake would seem a little weird.
To which Vince Cable would reply that he only wants to make sure that small and medium-size businesses can tap into the credit they need at this delicate stage of the economic recovery – and that there’s plenty of evidence that these foot-soldiers in the battle to rebuild the economy are being starved of vital financial provisions.
It’s a finely balanced argument. And the government may yet opt for providing a more generous scheme of taxpayer-backed bank loans for small businesses, in preference to coercing Lloyds and Royal Bank to do more.
What I would point out, however, is that if Mr Cable were to opt for new net lending targets for the two semi-nationalised banks, the argument could become a fraught legal one.
Because Lloyds’s and Royal Banks’ gross-lending agreements are written into lengthy binding contracts relating to support they’ve received from taxpayers – and it may not be quick, cheap or easy to re-write these agreements.
Also, as I’ve pointed out in respect of a previous scrap between banks and ministers over bonus payments, the directors of the banks would probably have to resign if the government forced them to extend credit in a way that they felt was uncommercial and was contrary to the interests of all their shareholders.
Mr Cable could find himself having to chair the banks’ boards as the price of bossing them around.
So is there no joy in the government’s shared agenda for the private sector? Well, there is a commitment to create the “most competitive corporate tax regime in the G20″ – though no detail on how that will be judged – and a vow that any new proposed regulations will only be introduced if first other bits of red tape of greater bothersome effect are first abolished.
Also, there looked to me to be a reason for non-doms to crack open the bubbly.
Because the Tories’ election manifesto had pledged that these (mainly) well-heeled individuals who live and work here, but pay tax (if at all) elsewhere, would pay a new flat-rate levy – and the Lib Dems had pledged to phase out the tax advantages for non-doms altogether.
So what does the coalition’s to-do list say? Only that the government “will review the taxation of non-domiciled individuals”.
Hmmm.
My sources in the coalition insist that this review should strike fear into the heart of the tax-avoiding non-dom community, that (really, truly) it is not an example of a review being a substituted for action.
Time will tell. But if past reviews of non-doms’ taxation is anything to go by, the plutocrats don’t need to be booking their flights to Switzerland quite yet.
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